Answers to Frequently Asked Budgeting Questions

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If life were cut-and-dried, budgeting would be a piece of cake. As everyone knows, life is unpredictable, and those unexpected events can derail not just your peace of mind but also your personal budget.

There are simple answers to the most common questions about how to keep your personal budget in step with the real world. Some answers will need to be adjusted to your own level of income and saving habits but are generally the best way to ensure a financially stable future.

How Do I Budget for One-Time Expenses?

Most household expenses can be easily accounted for every month: car payment, groceries, rent or mortgage payment, and so on. But for those bills that don't fall neatly into a monthly expenses category, you'll need to create a separate budget item for occasional or seasonal outlays. This money will go toward expenses for holidays, birthdays, anniversaries, and regular eye doctor and dentist visits.

There's another budget item that's even more important and is usually the most detrimental when it comes to a structured budget, so you're wise to prepare for it beforehand: This item covers one-time expenses. Most savers know this as the "emergency fund"; standard practice is to set aside three to six months of income to cover these expenses whose timing can't be foreseen, such as a major car repair or medical issue.

How Can I Track My Savings Goals?

Based on age and lifestyle, people save for all kinds of reasons. You might be putting money aside for retirement, annual property taxes, a trip abroad, a major home renovation, your children's college funds, or a big-ticket article of clothing or piece of jewelry. Whatever your need or desire, track your progress toward all of your goals. If you're savvy with Google Sheets or Excel, you can use a spreadsheet to monitor your savings. And, of course, Quicken is probably the best-known money management software.

You might also consider opening an online-only savings account with SmartyPig, which lets you put funds in separate sub-accounts with different savings goals.

Does Making a Budget Cost Anything?

While some money management tools can be expensive, there are many free or low-cost app options out there. Even the ones that charge a fee, like You Need A Budget, offer free trials and can be utilized during the trial period as a sort of learning tool.

Other apps, including Goodbudget, Mvelopes, and PocketGuard, offer both a free option and a version with more features for a fee.

For a free option that offers lots of features, try the Mint app from Intuit.

How Much Do I Need to Retire?

The economy is tricky and can be ruled by unforeseen factors, so determining how much money to set aside for retirement is hard. Too many factors are at play, such as whether you have children, what level of comfort you would like to retire in, and more.

One common guideline to follow when planning for your retirement is the Multiply by 25 Rule. This rule involves determining how much money you'll need by multiplying your ideal annual income in retirement by 25. So if you think you'll need $65,000 a year to retire on, plan to save at least $1,625,000.

What Are the Absolute Priorities?

If you feel overwhelmed by the number of things you need to save for—a wedding, a new refrigerator, a house—then take a deep breath and focus on a few critical items. Utilities and housing should be at the top, followed by food. Other key items include medication and transportation. A nice dinner out or new shoes are discretionary. Some items, like hospital bills, are not.

What If It Just Isn't Working?

If having and sticking to a budget is not working out and you're coming up short, don't worry. You could be budgeting perfectly, and the issue is no longer spending but income.

Side-income opportunities are available for full-time employees working 40 hours a week, ideally from home so that you can work in a relaxed atmosphere. If you're willing to work evenings and weekends, the extra money would put you closer to meeting your budgeting goals.

Article Sources

  1. Vanguard. "What's the Right Emergency Fund Amount?" Accessed March 2, 2020.

  2. Charles Schwab. "Saving for Retirement." Accessed March 2, 2020.